Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $370,000 Number of purchase orders Scheduling 250,000 Number of production orders Materials handling 500,000 Number of moves Product development 730,000 Number of engineering changes Production 1,500,000 Machine hours Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Machine Hours Number of Units Disk drives 4,000 300 1,400 10 2,000 2,000 Tape drives 4,000 150 800 10 8,000 4,000 Wire drives 12,000 800 4,000 25 10,000 2,500 Determine the activity rate for production per machine hour. a.$150.00 b.$75.00 c.$62.50 d.$176.47
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
| Activity Cost | Activity Base | ||
| Procurement | $370,000 | Number of purchase orders | |
| Scheduling | 250,000 | Number of production orders | |
| Materials handling | 500,000 | Number of moves | |
| Product development | 730,000 | Number of engineering changes | |
| Production | 1,500,000 | Machine hours |
| Number of Purchase Orders |
Number of Production Orders |
Number of Moves |
Number of Engineering Changes |
Machine Hours |
Number of Units |
|||||||
| Disk drives | 4,000 | 300 | 1,400 | 10 | 2,000 | 2,000 | ||||||
| Tape drives | 4,000 | 150 | 800 | 10 | 8,000 | 4,000 | ||||||
| Wire drives | 12,000 | 800 | 4,000 | 25 | 10,000 | 2,500 |
Determine the activity rate for production per machine hour.
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